The Supreme Court is preparing to hear a case on March 20th, that originates out of Arizona. The case Howell v. Howell boils down to a single issue; If a service member is ordered to provide the former spouse a community property share of their military retirement, and the retirement in question is reduced as a result of VA disability pay, does the service member have an obligation to still provide the ordered portion of their retirement to the former spouse, or is that portion reduced as per the Uniformed Services Former Spouses’ Protection Act (a 1982 federal law that authorizes state courts to divide up military retirement pay in a divorce).
As a bit of background, VA disability pay is not divisible as community property in a divorce and is tax-free for the receiving party. Military retirement pay is divisible as community property in a divorce and is taxable. Federal law generally prohibits people from “double-dipping”, simply put, you cannot receive both military retirement and VA disability pay. Any portion of VA disability you receive is subtracted from the retirement pay you receive. For example, a former service member who is eligible to receive $5000 per month in retirement pay, but is 50% disabled by the VA will receive $2500 per month from the VA (tax-free) and $2500 per month from the DoD.
It isn’t hard to see why someone would take the VA money. The tax benefits alone are substantial, and as is being argued now, the current law indicates that the former spouse’s share is reduced significantly, which lowers the amount owed proportionately. In our example, if the former service member was ordered to provide the former spouse 50% of his retirement pay, the amount owed WITHOUT the VA election would be $2500, with the VA election it is only $1250.
Here Mr. Howell was ordered to provide his former spouse her community property share of his military retirement, and after retirement (as is usually the case) Mr. Howell elected to receive VA disability pay in lieu of the equivalent portion of his military retirement pay. Mrs. Howell and her lawyers are arguing that Mr. Howell still must pay her the amount presumed prior to the VA disability pay kicking in. The Arizona Supreme Court agreed with Mrs. Howell, and Mr. Howell sought and was granted a hearing on the issue in front of the United States Supreme Court.
Interestingly, and probably a large reason for the US Supreme Court agreeing to hear this case, the State Supreme Courts that have heard similar cases on this issue are split on how they interpret the law.
Here at RPM Law, we are anxiously awaiting the Court’s ruling as we are handling several cases that will be impacted by it.
If you are currently dealing with a family law matter that involves military benefits, remember that we are service members ourselves and uniquely prepared to handle these matters. Reach out today and schedule a cost-free consultation by calling (520)740-1802
